The initiative of KNSBL was taken with an aim to provide an economical and financial development to the people of Khambhat. The bank was initiated on Dussehra of 1971, dated 29 September 1971 by the pioneers of the bank. The functioning of the bank began slowly but strongly. Gradually the awareness about bank spread across the city and people started contributing their inputs by purchasing bank shares.

Initiated with a small share amount of INR 53,000, the bank today holds a total share of much more than INR 51,71,100. The initial years saw loss, while today the bank runs on huge profits.